After months of record-breaking sales, the latest data from the Automotive Business Council (formerly known as the National Association of Automobile Manufacturers of South Africa – Naamsa) is sounding the alarm bells for the automotive sector. September saw a significant slowdown, with a 4.1% decline in sales. This comes as numerous external factors, such as affordability, high debt levels, inflation, and fuel prices, start to weigh heavily on the local industry.
In the month of September alone, Naamsa reported sales of only 46,021 vehicles, down by 1,963 units compared to the 47,984 vehicles sold during the same period last year. Export sales also took a hit, dropping by 12.6% or 5,217 units to reach a total of 36,247 units. The figures are cause for concern within the industry and raise questions about the sustainability of the current market conditions.
Breaking down the sales figures, around 80.7% of new vehicles were sold through dealerships, while 13.6% were bought by the vehicle rental industry. Corporate fleets and the government accounted for 2.9% and 2.8% of sales, respectively. Despite the slight dip in overall sales, some segments experienced growth. The new light commercial vehicles, bakkies, and minibuses category saw a 4.6% increase, amounting to 581 units. However, medium vehicle volumes experienced a decline of 5.1% or 44 units. On a positive note, truck sales continued to climb, boasting a 10.5% increase year on year, with 2,356 units sold in September.
While the domestic market faced challenges, vehicle exports remained relatively strong, showing an 8.3% increase compared to the previous year. Sales of motor vehicle parts, accessories, and other transport equipment also recorded growth, totaling 9.5%.
Naamsa attributes the slump in sales to various external factors that have placed significant pressure on the industry’s key performance indicators. Rising fuel prices, inflation, exchange rate fluctuations, ongoing issues in transport logistics, Eskom’s energy capacity constraints, and volatile commodity prices all contributed to the difficult market conditions. Despite these challenges, the automotive industry has displayed admirable resilience in year-to-date new vehicle sales and export performance for September 2023.
Consumer affordability and high debt levels are among the industry’s major concerns. The South African Reserve Bank’s Quarterly Bulletin reveals that household debt exceeds household disposable income by 62.5% in the second quarter of 2023. This imbalance poses a threat to the purchasing power of consumers and their ability to invest in new vehicles.
To address these challenges and secure the future of the industry, Naamsa President and CEO of Isuzu Motors South Africa, Billy Tom, stressed the importance of collaboration and securing high levels of investment. Tom also highlighted the need for policies that support the growth of the new energy vehicle (NEV) segment, citing other African countries such as Morocco, Egypt, and Kenya as examples to emulate.
Recognizing the significance of the automotive industry to the South African economy, Gauteng Premier Panyaza Lesufi and Eastern Cape Premier Oscar Mabuyane announced their collaboration with Naamsa, the National Association of Automotive Component and Allied Manufacturers, and various government stakeholders. The aim is to ensure that the Eastern Cape, a prominent automotive hub, maintains its competitive advantage. As part of this initiative, the Eastern Cape plans to install 13 battery electric vehicle charging stations by March 2024, with support from the Automotive Industry Development Centre.
With the automotive industry contributing 4.9% to South Africa’s GDP, supporting both manufacturing and retail sectors, its stability is crucial. In 2022 alone, vehicle and automotive component exports were valued at R227.3 billion, representing 12.4% of the country’s total exports. These figures highlight the industry’s significance and underscore the need for concerted efforts to overcome the current challenges.
In conclusion, the recent decline in automotive sales in South Africa raises concerns about the state of the sector. Various external factors, including affordability issues, high debt levels, inflation, and fuel prices, are putting pressure on the industry. While the market experienced a downturn in September, there were pockets of growth in certain vehicle categories. The industry remains focused on addressing these challenges through collaboration, investment, and the development of policies that support new energy vehicles. The South African government, as well as regional authorities, are working closely with industry stakeholders to safeguard the automotive sector’s future. With its significant contribution to the country’s GDP and export earnings, the automotive industry’s stability and growth are crucial to South Africa’s overall economic well-being.